Trademark Infringement Liability of the Trading Platform Operators. Wang Ze, China Trademark Association Shanghai, June 15, 2012

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1 Trademark Infringement Liability of the Trading Platform Operators Wang Ze, China Trademark Association Shanghai, June 15,

2 I. The classification of the trading platform Solid trading platform: the Silk Market Virtual goods trading platform: the website Taobao 2

3 II. Two factors should be pondered in regards to the identification of the tort liability The balance between trademark right protection and the development of online trading industry The balance of the interests of trademark owners, trading platform operators and consumers 3

4 1. The balance between trademark rights protection and the development of the online trading industry First of all, e-commerce has played an important role in stimulating China's consumption. By the end of 2011, China had 194 million online-shopping users and statistics show e-commerce websites account for 37.8% of China's network applications. Online sales reached RMB782,560,000,000, which accounts for 4.32% of total social retail sales (source: China Report on E- commerce between 2010 and 2011, released by the Ministry of Commerce on the China Beijing E-commerce Conference of the Year 2012 held on May 29th, 2012) China's trademark protection and the liability of the trading platform operators should follow steadily. Otherwise, the development of both the online and physical markets will be largely restricted. 4

5 2. The balance of interests of the trademark owners, trading platform operators and consumers The interests of the trademark owners: to protect their trademark rights The interests of trading platform operators: to reduce costs The interests of the consumers: to make the purchase cost-friendly and convenient China's trademark protection and the liability of the trading platform operators should follow steadily. Otherwise, law enforcement related to trademark protection will increase the operating costs of the trading platforms, and the higher costs will be passed on to consumers by means of higher prices charged on them. 5

6 III. The reference clauses for the identification of tort liability Article 52 of the Trademark Law of the People's Republic of China says "Any of the following acts shall be an infringement upon the exclusive right to use a registered trademark: (2) Selling the commodities that infringe upon the right to exclusive use of a registered trademark;" Article 56 Paragraph 3 of the Trademark Law says Anyone who sells a goods that it or he does not know has infringed the exclusive right to use a registered trademark, and is able to prove that it or he has obtained the goods legitimately and indicates the supplier thereof shall not bear the liability for damages. 6

7 IV. The three factors that may influence the identification of the trademark infringement Whether supervising the trademark or the relevant trading information is possible Whether the trademark protection measure is feasible: market inspection. Whether trademark infringement is under control: the trademark infringement can be rectified through the infringing products crackdown and deletion of the relevant infringing information. 7

8 V. Legal basis regarding the identification of the trademark infringement The special law: Article 50 of the Regulations for the Implementation of the Trademark Law of the People's Republic of China says "Any of the following acts shall constitute an infringement on the exclusive right to use a registered trademark: (2) intentionally providing facilities such as storage, transport, mailing, concealing, etc. for the purpose of infringing another person's exclusive right to use a registered trademark." 8

9 The higher-level law: Article 36 of the Tort Liability Law of the People's Republic of China says: "The internet users and internet service providers shall assume tort liability if they utilize the internet to infringe upon civil rights and interests of others. If an internet user commits tortious acts through internet services, the infringee shall be entitled to inform the internet service provider to take necessary measures, including, inter alia, deletion, blocking and unlinking. If the internet service provider fails to take necessary measures in a timely manner upon notification, it shall be jointly and severally liable with the said internet user for the extended damage. If an internet service provider is aware that an internet user is infringing on the civil rights and interests of others through its internet services and fails to take necessary measures, it shall be jointly and severally liable with the said internet user for such infringement." 9

10 VI. The relevant regulations the State Administration for Industry and Commerce adopted and the opinions that the SAIC issued Regulations: Article 24 of the Interim Measures of Online Commodity Trading and its Relevant Services says "the operators of the online trading platforms shall take necessary measures to protect registered trademarks and name right of enterprises. In regards to the circumstance that the trademark owner can provide evidence to prove the operator of the online trading platform has infringed upon its trademark right, name right of enterprise or its other legal rights given in the unfair competition law, the law enforcement organs should take relevant actions on the infringers in accordance with the PRC Tort Liability Law." 10

11 The relevant normative act: Opinion on the Reinforcement of the Management of the Online Group Buying Activities Ref. No. Gong- Shang-Shi-Zi (2012)39 (4) The ban on unfair competition The online group buying website operators shall take necessary measures to protect the exclusive rights of the registered trademarks and name rights of the enterprises. In regards to the circumstances under which the trademark owner can prove that the suppliers of the goods/services for the online group buying website have infringed upon its trademark rights, the name rights of the enterprise or its other legal rights given in the unfair competition law, the law enforcement organs should take relevant actions on the infringers in accordance with the PRC Tort Liability Law." 11

12 VII. Bestseller Fashion Group (Tianjin) Co., Ltd v. ebay Eachnet for trademark infringement disputes 1. Basic facts Bestseller Fashion Group (Tianjin) Co., Ltd (the Plaintiff) is authorized to use the TMs "ONLY," "VEROMODA," and "JACK & JONES." Therefore, it is also authorized to manufacture and sell the products bearing the aforesaid trademarks. Bestseller Fashion Group (Tianjin) Co., Ltd found a large quantity of trade information in respect to the unauthorized "ONLY," "VEROMODA," branded women's wear and "JACK & JONES" branded men's wear listed on the website ebay Eachnet (the Defendant). In addition, the Plaintiff also found evidence of the actual transactions related to the infringing products. 12

13 2. Claims made by the Plaintiff and the Defendant The Plaintiff: ebay Eachnet allows other parties to sell infringing products on its online trading platform and its act has infringed on the Plaintiff's trademark rights. The Plaintiff therefore filed a lawsuit against ebay Eachnet and Shanghai Eachnet Trading Co. Ltd. The Defendant claimed that ebay Eachnet only provides an online trading platform and it had not participated in business transactions. Therefore, it should not be liable for the sale of the infringing products. 13

14 3. The Verdict rendered by the Court According to a clause in ebay Eachnet's user agreement listed on the website, ebay Eachnet's users shall be responsible for the content or listings it posted and the items it advertised and sold on the website. ebay Eachnet provides an online venue for its users to list their business information. Therefore, the Court finds that the Defendant was aware of its users' infringement upon the third parties registered trademark, did not stop the trademark infringement or interfere with the distribution or advertising of such trading information. Since the Defendant is unaware of its users' trademark infringement, it should not be liable for the trading information published by its users on its website. 14

15 Conclusion Online trading platform operators should be subject to limited liability compared to actual online sellers. Online trading platforms can be used for the purpose of infringing upon another person's exclusive rights to use a registered trademark given in the Regulations for the Implementation of the Trademark Law. The Tort Liability Law can be applied to identify the legal liability of online trading platform operators. Solid trading platform operators should pay due diligence to their market and take necessary precautions for the trademark infringements, because they can access the trademarks and trading information and arrange inspections. Online trading platform operators are only liable for the necessary remedy after the trademark infringement is found, because they have no access to the trademarks and trading information and cannot arrange inspections. Trademark owners should be liable for losses to the trading platform operators for their wrongdoings. 15

16 Thanks 16

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